Today is the day when the most important data will be released, it is the US non farm payroll number. Most traders have un winded their short positions ahead of this data release as they are concerned that the market is going to be extremely volatile given that it is Easter weekend. The only market which is trading today is the FX market. Although, most of the volatility in the market will be due to the US NFP data but the absence of the liquidity is going to make the matter worse. The fact is that when you have less liquidity in the market, the chances of slippage are much more as compared to the normal trading environment. Therefore, even though you have a stop under certain level but on a day like this, if there is no buyer or seller at that point, you are bound to get much larger slippage.
Thus, it is important for traders make the position sizing more appropriate when their is an issue of liquidity in the market. Moreover, in the past, when the U.S. NFP payroll data has been released on Easter Friday, most of the trading action does takes place in the first 90 minutes of the data release therefore, it is important that you are fast to react when the data is released.
Although there are strong arguments stacked in favour of weaker number, but you cannot ignore that the other side of the equation does also have some important elements which you cannot ignore. For instance, consumer confidence, weekly jobless count and continuing claims data, all have been very strong, and all these elements combined together will point towards a strong number. But, if we look at the arguments which are stacked on the weaker side of the equation, they are just a little more influencing. For example, ADP employment, Michigan confidence and employment component of ISM were all weak and they point that today’s reading could be fragile.
So, the big question is what will happen if we get a strong number and what the outcome could be if we get a weak number? The million dollar question it is! Generally speaking, a strong number for US Non farm payroll number will make the foundation of the rate hike more stronger as this represents more solid footing for the U.S. economy and the expectations will be that inflation will take care of itself. In a nutshell, miss Yellen will have a hard time in defending the argument that why the rate hike should not be taking place this summer.
But, if we get a weak number today, this could trigger another sell off for the dollar in a short term and the questions will be raised if the summer rate hike is still on the table, given that we already have the downward revision of the US GDP data. However, such a move may have its limits against the euro because Greece is still the major problem of the eurozone and the leaders of the eurozone has called for another meeting on the 8th and 9th April. Unless, we have a resolution of Greek problems, it is extremely difficult that we will see any upward move.